Investor confidence was hit by news that recession in the 17-nation eurozone deepened sharply in the final three months of last year as the debt crisis continued to sap growth.

The eurozone economy shrank 0.6 percent in the three months to December last year, which compared with a contraction of 0.1 percent in the previous quarter, according to official data.

In the second quarter of last year, it contracted 0.2 percent, meaning that the recession has now lasted three quarters. The eurozone had meanwhile registered zero growth in the first quarter of last year.

Analysts said the latest figures were worse than expected, with the major economies, including powerhouse Germany, also dragged down.

For last year as a whole, the eurozone economy contracted 0.5 percent and the wider 27-member EU by 0.3 percent.

“We’re sort of desensitized to a certain extent to a proper knee-jerk reaction, but given soft leads from Europe, it’s led to declines in Asia,” said Jason Hughes, head of premium client management at IG Markets in Singapore.

On currency markets, the euro weakened to US$1.3347 and ￥123.28, from US$1.3385 and ￥124.10 in New York.

The US dollar also weakened to ￥92.75 from ￥92.87, with the Japanese unit pulling back some of its recent losses ahead of the G20 meeting in Moscow that is expected to focus on a growing currency row.

Finance ministers and central bankers from the Group of 20 leading economies were scheduled to meet from yesterday as Tokyo comes under attack, mostly from Europe, over its monetary policy of big spending, which has pushed down the yen.

The Bank of Japan, under pressure from the new government, last month unveiled a plan for unlimited monetary easing and a target for 2 percent inflation.

The moves, which had been expected, added to the yen’s weakness and sparked charges of manipulation from around the world and fueled fears of a currency war where rival nations drive down their currencies to gain a trade advantage.

On Thursday Japan’s Asahi daily, citing a copy of a draft joint statement, reported that the G20 would warn members off any competitive currency devaluations.

“Ahead of the G20 meeting, caution is emerging over the yen’s outlook,” Hiroichi Nishi, general manager of equity at SMBC Nikko Securities, told Dow Jones Newswires.